ARGENTINA / UPDATE: On a roll

Despite falling sales figures, the Argentine category is in better condition than it would appear at first glance, thanks to growing interest from supermarket buyers and a targeted consumer campaign. Fionnuala Synnott reports

Argentine wine has great potential but it is not realising it – at least not in the UK. This, in itself, is not new but the latest figures make sober reading. Volume sales are down 14% (Nielsen MAT 19/05/07), which is bad news for a category that only has a 1.5% share of the UK off-trade. “We are the fifth largest wine producer in the world but the potential for UK exports is not very developed at all,” says José Alberto Zuccardi, director of Familia Zuccardi. 

More worryingly, volume sales have dropped 24.6% in the multiple grocer sector, while value sales are down 18.6%. But, according to Greg Wilkins, founder of BrandPhoenix, there is a simple explanation for this: “Inti was a large player in the Argentine category two years ago. The brand was heavily promoted at entry-level, which boosted volumes in the category.” Now that Inti is no longer around to inflate the MAT figures for the category with heavy discounting activity, any comparative analysis is bound to make the situation look worse than it is really is.

Rather encouragingly, some of the brands at the higher end of the Argentine category such as Norton and Trapiche are starting to come into their own. According to Wilkins, Trapiche, which has tended to underperform historically, is finally gaining traction in the UK market with sales up by 122% in multiple grocers and 76% overall. In fact, James Forbes, UK director, Wines of Argentina, has noticed that sales of wines priced between £3 and £10 have increased by around 3%. “This is just the beginning, we are going to see much more growth in the future.”

Meanwhile, Argentina is generating good volume and value sales in the impulse sector (up 9% and 5.2% respectively), where there is the potential to hand sell Argentinian wines directly to the consumer.

Until now, Argentina has had little presence in the multiple grocer sector, but there are signs that this is changing with supermarkets such as Sainsbury’s increasingly allocating individual shelf space to Argentina rather than listing it in a generic South America or Americas category alongside Chile. Retail giant Tesco has also been taking an active interest in the category. According to James Davis, wine buying manager,  Tesco is looking to capitalise on the growth in sales of Argentinian wine by introducing  approximately ten new lines, including four Fair Trade wines, as well as more premium offerings including a Sauvignon Blanc from Patagonia. Davis says: “Volume sales of Argentine wine are currently growing by triple-digit numbers in Tesco stores, while, at the beginning of June, our in-house figures showed a 71% value increase over a 52-week period. Customers are buying into the category due to a fondness for Malbec and a few key brands such as Argento, Salentein and Tesco Finest.”

The consensus within the trade is that when Argentina gets wine right, it really gets it right. But the country has only entered the public consciousness relatively recently. The increase in tourism that followed the devaluation of the peso has helped to give people a feel for the country but, according to Forbes, many consumers don’t know that Argentina produces wine. However, recent initiatives by Wines of Argentina have helped to raise awareness of the country’s wines by generating inches in the consumer press.

Louise Bull, trade marketing manager at Berkmann Wine Cellars, which distributes Norton,  says: “Wines of Argentina has helped to bring more focus to the category and has started a buzz about Argentine wine.” Simple but effective campaigns such as the “Malbec for meat” campaign have caught people’s imagination.“ Different ideas like this campaign will get Argentina the respect it deserves in the trade”, says Jo Maclean, marketing manager at Codorníu. The Argentina Wine Awards, which took place in Argentina in February, have also raised the profile of Argentinian wines within the trade.

Wine with personality

Argentine producers should be concerned by the downward trend in the UK off-trade but they should focus on highlighting the quality wines in the category rather than just building volume. “We all know Argentina has some really great wine. But whereas the quality of Chilean wine is constant, Argentina is all about peaks and troughs,” says Wilkins. Although it may not be known for consistent quality, Argentina has a reputation  for producing wines with personality: “Given the current uniform offer from the New World, there is the opportunity to position Argentina as the region that can offer consumers new and exciting wines,” says Marie Michalas, brand manager for Santa Julia. According to Zuccardi, Argentine wine “reflects the people and the region and is not an industrial beverage.” Manuel Louzada, oenology director at Terrazas de los Andes, also feels it is important to retain some character definition: “We don’t want to replicate the same style as the rest of the industry.”

Louzada thinks that Argentina has a lot to offer the consumer: “Argentina has perfect fruit expression as you don’t get too much over extraction. The natural fruit and round tannins in Argentine wine appeal to

the consumer”. High-altitude vineyards also make for healthy, concentrated, pure wines. Maclean explains: “Syrupy Malbec is a thing of the past. Our wines are more defined now with more varietal character, higher acidity and more minerality, which contrasts with the hot, baked flavours traditionally associated with Mendoza.”

For years, the Malbec grape has acted as an ambassador for the Argentine wine industry, serving to highlight how different its wines are. But Berkmann’s Bull thinks it is a mistake for Argentina to narrow itself down to a few varietals: “We should promote the varietals that work well for Argentina and not limit ourselves to Malbec and Torrontés. Chile didn’t push its native varieties – this led to a far wider sampling of its wines.” Ricardo Rebelo, vice president and CEO, Finca Flinchman (owned by Portuguese giant Sogrape) also feels that Argentina should highlight its other varietals: “We are known for our Malbec, but Argentina also produces some great Shiraz and Cabernet Sauvignon.”

The wines are there, the commitment is there, it’s the interpretation that Argentina needs to get right. According to Wilkins, this will come through brand building: “Argentina needs more Trapiche and Nortons to encourage consumers to buy Argentine wine week in, week out.” Bull, meanwhile, feels that it should be a joint effort between brands and the generic body. “It is down to a few companies to take the lead but it doesn’t always happen as there are no Argentine brands in the top 20 world brands.”

Bob Rishworth, MD of Chalié Richards, which is supporting Las Moras’ launch of new Argentine brand, Andean, in the UK, agrees: “Apart from Argento, there is not really a brand-leading Argentine wine. A number of New World brands have made the mistake of thinking they are building brands when they are really building a franchise. No one has done for Argentina what Kumala and Arniston Bay have done for South Africa.” He would like to avoid taking this kind of deep discounting approach with Andean, ideally not selling it much below £4.99: “There is no secret to building consumer loyalty within a category: provide consistent quality wines at a good price.”

Future growth

Historically, Argentine producers have been focused on their domestic market, the sixth largest wine-consuming nation in the world. But following a decline in domestic consumption and the devaluation of the peso, the wine industry has become increasingly involved in the export markets, with varying degrees of success. The UK is one of the only markets where Argentina is not performing well. Volume sales in the US, its number one export market, (the UK is number two), are up by 32.4%, with the remaining top export markets all recording double-digit growth, according to figures sourced by Caucasia Wine Thinking.

According to Wilkins, Argentine producers need to get the nuts and bolts of the export market right in order to build up the UK category. “In the past, Argentina has had issues servicing the UK market. If you break the cycle and the product is off the shelf for any length of time it can take a long time to get it back. The wine has to be on the shelf from Monday to Sunday.” But, according to Rebelo, logistics are not an issue. Instead, he feels that Argentina really needs to work on its image.

Until now, Argentina has been weak at blowing its own trumpet and shouting about the quality of its wines. But significant investment from domestic and foreign sources (more than US$1 billion has been invested in the Argentine wine industry since the 1990s) has led to a renewed focus on quality. Rebelo says: “Sogrape has invested US$50m in Argentina in the past ten years because it sees huge potential in the country. Argentina has the right soil, climate, grapes and level of knowledge to reach the consumer, as well as one of the best quality/price ratios”. Matias Bauza, international press and public relations manager for Salentein, adds: “We have to build the image of Argentina as a quality wine producer. We have to operate a constant strategy while offering a good product and value for money at different price points. If we can manage our message and be more professional in managing our supply chain then we can grow our market share.”

Argentina is beginning to do all the right things but building UK market share is a notoriously slow and difficult process. Forbes observes: “Producers need to spend more time in the market because the best advertisement for Argentina is the Argentines. We need to pick up on UK market trends such as rosé, sparkling and organic wine, rather than coming to the party late. We also need to reconsider bottle size and packaging weight.”

For years, the wine trade has been talking about Argentina’s potential and lamenting its apparent inability to realise it. But it seems that the industry is finally on the move thanks to a combination of generic activity, significant investment and new brands in the category – all of which are finally persuading buyers in the multiples to expand their Argentine offer.

© db July 2007